What happens when New York fails to pay contracts with nonprofits?

On Behalf of | Mar 21, 2022 | Business Tax

It is common for a nonprofit to get funding from government contracts. When it comes to those who operate in New York City, this may include contracts with the city itself.

Unfortunately, the city is not always great about paying its bills. Scott Stringer, the former New York City Comptroller, noted that non-profits are the backbone of the city. This leads to frustration when the comptroller also admits that the city failed to make timely payments on more than 75% of its contracts with these organizations. Even more concerning, upon review of the city’s contracts the comptroller also found that the vast majority of delays, almost 90%, were human services contracts. These include contracts that provide funds for the most vulnerable, for organizations that serve the homeless and for work to educate children.

Why is the city so bad at paying these contracts on time?

City officials point to paperwork and protocol slowing the process, but the issue remains a problem even after former Comptroller Stringer tried to implement changes when he called for the city’s Charter Revision Commission to impose new deadlines years ago.

In a recent report by Crain’s New York, nonprofits continue to wait years to get millions in promised funds. Although the pandemic likely did not help, the problem with prompt payment remains and is hurting the organizations that need timely payment now more than ever.

What types of issues do nonprofits have to navigate when government entities fail to pay off their contracts in a timely manner?

The issues are similar to those faced by other businesses and include paying off vendors and paying their employees. Late payment can also make it difficult to meet other financial obligations like payroll taxes. A failure to pay these bills can mean the organization loses their vendors and employees as well as faces additional penalties.

What options are available in these situations?

Government funded entities who are penalized for failure to pay their employment taxes in these situations have options. The attorneys at Goldburd McCone can review the matter and discuss various planning options as well as the possibility for penalty abatement.